'unreal' banking

one of my students, who works in a bank, was explaining something to me the other day. i understood every word he said, but still had to make him repeat the whole thing 3 times, cos i really couldn't understand the logic, and thus thought i'd misunderstood. but really, i hadn't.

what he said what that really rich people who want to invest their money in funds sign a contract with the bank, 'promising' to give it, say, $1 million within 6 years. it doesn't matter when the money goes in, apart from a downpayment at the beginning and perhaps some regular small sums once in a while. the non-existant $1 million then gets invested from the day of the contract signature, and is supposed to generate interest. but as it mostly doesn't exist...

this explains a lot about how the financial crisis came about. and the problem is that now, the deadline for a lot of these 'promises' has arrived for quite a few people, but they of course don't have the money anymore... great, isn't it?